A BILL to amend the Code of West Virginia, 1931, as amended, by
adding thereto a new article, designated §5E-3-1, §5E-3-2,
§5E-3-3, §5E-3-4, §5E-3-5, §5E-3-6, §5E-3-7, §5E-3-8, §5E-3-9,
§5E-3-10 and §5E-3-11; and to amend and reenact §31-15-6 of
said code, all relating to the creation of an innovation and
development program; providing a short title and declaration
of policy; setting forth purposes; providing definitions;
authorizing and directing the Economic Development Authority
to propose rules to implement its provisions and provide for
the effective and efficient administration of the program;
authorizing the authority to provide technical and
professional assistance to entrepreneurs in the state;
authorizing the authority to make qualified investments and
loans; authorizing recoverable revenue credits to private
investors for investments in qualified investment companies pursuant to rules to be promulgated by the authority;
authorizing tax credits to investors in qualified community
development entities; creating a revolving fund to deposit all
profits collected by the Economic Development Authority; and
specifying disclosure, conflict of interest and
confidentiality standards for the operation of the innovation
and development program.

Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended
by adding thereto a new article, designated §5E-3-1, §5E-3-2, §5E-
3-3, §5E-3-4, §5E-3-5, §5E-3-6, §5E-3-7, §5E-3-8, §5E-3-9, §5E-3-10
and §5E-3-11; and that §31-15-6 of said code be amended and
reenacted, all to read as follows:

CHAPTER 5E. VENTURE CAPITAL COMPANY.

ARTICLE 3. INNOVATION AND DEVELOPMENT ACT.§5E-3-1. Short title.
This article may be cited as the "West Virginia Innovation and
Development Act."§5E-3-2. Declaration of policy.
(a) The Legislature finds and declares that the West Virginia
economy can be strengthened by the establishment of a technology
based economic development program that is tailored to West
Virginia's specific markets, opportunities and challenges in
establishing innovation driven enterprises.
(b) The Legislature further finds that West Virginia's specific markets, opportunities and challenges in establishing
innovation driven enterprises can best be addressed by the
establishment and operation of a technology based economic
development program as set forth in this article.§5E-3-3. Purposes.
(a) The purpose of this article is to promote the development
of the human resources and the diversification of the economy of
West Virginia, by strengthening the foundations of West Virginia's
distinctive market environment, by building on West Virginia's
established industrial and economic base and establishing a long
term program that will result in a strong, viable and high-growth
economy in West Virginia.
(b) This article establishes an economic development program
that is designed to:
(1) Help build and nurture entrepreneurial support structures
and attract executives to lead West Virginia-based companies;
(2) Support the formation and deployment of private equity at
all stages of the business development lifecycle, including seed
capital, venture capital and other equity and normal bank debt that
can help emerging as well as mature businesses remain, adapt and
grow in West Virginia;
(3) Be flexible in terms of who may access program resources;
how it is accessed;
(4) Operate according to clearly expressed standards designed
to grow, build and keep businesses in West Virginia;
(5) Provide measurable results and hold participants accountable;
(6) Leverage existing programs and resources in all regions of
West Virginia;
(7) Operate as a "fund of funds" by investing in qualified
investment companies and receiving a return on such investments
from distributions from participating companies;
(8) Support angel networks and the funding of seed and venture
capital funds, specifically including community development venture
capital companies; and
(9) Provide for a return on the state's investment by sharing
the return of capital and profits with private limited partners.§5E-3-4. Definitions.
As used in this article, the following terms have the meanings
ascribed to them in this article, unless the context in which the
term is used clearly requires another meaning or a specific
different definition is provided:
(1) "Applicable percentage" means seven percent for the first
credit allowance date and eight percent for the next four credit
allowance dates.
(2) "Authority" means the West Virginia Economic Development
Authority, established under article fifteen, chapter thirty-one of
this code, or any successor to all or any substantial part of its
powers and duties.
(3) "Credit allowance date" means, with respect to any
investment in a qualified community development entity:
(a) The date on which such investment is initially made; and
(b) Each of the four anniversary dates of such date
thereafter.
(4) "Qualified community development entity" has the same
meaning given such term in Section 45D of the Internal Revenue Code
of 1986, as amended; provided that such entity has entered into, or
is controlled by an entity that has entered into, an allocation
agreement with the Community Development Financial Institutions
Fund of the U.S. Treasury Department with respect to credits
authorized by Section 45D of the Internal Revenue Code of 1986, as
amended.
(5) "Qualified Investment Company" means an angel network,
seed capital, venture capital or other private equity fund that has
been qualified by the authority.
(6) "Recoverable revenue credits" means credits awarded by the
authority pursuant to section seven of this article of which
entitles the state to receive not less than forty percent of the
profits allocable to the tax-advantage portions of the investment.
(7) "State" means the State of West Virginia.

§5E-3-5. Rules - Report of findings to Joint Committee on
Government and Finance.

The authority shall propose rules, for legislative approval in
accordance with article three, chapter twenty-nine-a of this code
to carry out the policy and purposes of this article, to provide
any necessary clarification of the provisions of this article and
to efficiently provide for the general administration of this
article. The authority may propose additional rules for legislative approval in accordance with article three, chapter
twenty-nine-a of this code that it considers necessary to provide
for the efficient administration of the recoverable revenue credits
awarded to qualified investment companies under this article. The
authority shall propose rules in conjunction with the Department of
Commerce to require persons receiving any money or recoverable tax
credits pursuant to this article to submit information that is
necessary to determine the effectiveness of this act and whether
the act shall be continued. Beginning July 1, 2011 and on July 1
of each year thereafter, the authority shall report to the Joint
Committee on Government and Finance its findings obtained from such
information.§5E-3-6. Investments and technical assistance.
(a) From moneys appropriated for such purposes to the
authority, the authority is authorized to provide or pay for
technical and professional assistance to entrepreneurs in the
state, all pursuant to such rules as the authority may propose from
time to time pursuant to the provisions of section five of this
article, and pursuant to such policies and procedures as the
authority may adopt from time to time to effectuate the purposes of
this article.
(b) From moneys appropriated for such purposes, the authority
is authorized to make seed capital, venture capital and other
equity investments in qualified investment companies operating in
the state, all pursuant to such rules as the authority may propose
from time to time pursuant to the provisions of section five of this article, and pursuant to such policies and procedures as the
authority may adopt from time to time to effectuate the purposes of
this article.
(c) The authority is authorized to award a total of $1 million
in each fiscal year to fulfill the purposes of this section. Funds
disbursed or awarded under this section shall be awarded pursuant
to a competitive selection and award process designed to further
the purposes of this article, pursuant to such rules as the
authority may propose from time to time pursuant to the provisions
of section five of this article, and pursuant to such policies and
procedures as the authority may adopt from time to time to
effectuate the purposes of this article.§5E-3-7. Recoverable revenue credits.
(a) To encourage private investors to invest in qualified
investment companies, including seed capital, venture capital and
other private equity funds to build and support innovative
businesses across the state, the authority is authorized to award
a total of $5 million each fiscal year in recoverable revenue
credits. The total amount of recoverable revenue credits
authorized for a single qualified investment company may not exceed
$2 million in any single round of credits allocated by the
authority.
(b) Recoverable revenue credits authorized by this section are
intended to provide the state with the opportunity to benefit from
the success of any and all qualified investment companies
authorized under this article, and shall consist of: (1) A tax credit for private investors in qualified investment companies
equal to fifty percent of the investor's investment, all to be
calculated and applied as set forth in this article, coupled with;
(2) the right in the state to receive not less than forty percent
of the profits allocable to the tax-advantaged portion of
investments in any qualified investment company authorized under
this article, all pursuant to such rules as the authority may
propose from time to time pursuant to the provisions of section
five of this article, and pursuant to such policies and procedures
as the authority may adopt from time to time to effectuate the
purposes of this article.
(c) Recoverable revenue credits authorized by this section
shall be allocated pursuant to such rules as the authority may
propose from time to time pursuant to the provisions of section
five of this article, and pursuant to such policies and procedures
as the authority may adopt from time to time to effectuate the
purposes of this article.
(d) Any investor, including an individual, partnership,
limited liability company, corporation or other entity, who makes
an investment in a qualified investment company authorized by the
authority under this article, which is independently operated by
qualified managers and is not directly or indirectly operated or
managed by the investors, is entitled to a recoverable revenue
credit equal to no more than fifty percent of the investor's
investment in the qualified investment company: Provided, That no
investors shall receive the recoverable revenue credit without the approval of the authority. The other terms and conditions of the
credit shall be established by the authority pursuant to such rules
as the authority may propose from time to time under the provisions
of section five of this article, and pursuant to such policies and
procedures as the authority may adopt from time to time to
effectuate the purposes of this article.
(e) The recoverable revenue credits allowed by this article
shall be taken after all other credits allowed by chapter eleven of
this code have been taken. The credits must be taken against the
same taxes and in the same order as set forth in subsections (c)
through (i), inclusive, section five, article thirteen-c, chapter
eleven of this code. The credit for investments by a partnership,
a limited liability company, a corporation electing to be treated
as a subchapter S corporation or any other entity which is treated
as a pass through entity under federal and state income tax laws
may be divided pursuant to election of the partners, members,
shareholders or owners.
(f) The recoverable revenue credits allowed under this section
is to be credited against the taxpayer's tax liability for the
taxable year in which the investment is made. If the amount of the
recoverable revenue credit exceeds the taxpayer's tax liability for
the taxable year, the amount of the credit which exceeds the tax
liability for the taxable year may be carried to succeeding taxable
years until used in full, or until forfeited. Recoverable revenue
credits may not be carried forward more than fifteen years.
Recoverable revenue credits may not be carried back to prior taxable years. Any recoverable revenue credit remaining after the
fifteenth taxable year is forfeited.
(g) Recoverable revenue credits allowed under this section may
not be used against any liability the taxpayer may have for
interest, penalties or additions to tax.
(h) Notwithstanding any provision in this code to the
contrary, the Tax Commissioner shall publish in the State Register
the name and address of every taxpayer and the amount, by category,
of any recoverable revenue credit awarded under this article. The
categories by dollar amount of credit received are as follows:
(1) More than $1, but not more than $50,000;
(2) More than $50,000, but not more than $100,000;
(3) More than $100,000, but not more than $250,000;
(4) More than $250,000, but not more than $500,000;
(5) More than $500,000, but not more than $1 million; and
(6) More than $1 million.

§5E-3-8.

Credit for investors in a qualified community
development entity.
(a) Any investor, including an individual, partnership,
limited liability company, corporation or other entity, who makes
an investment in a qualified community development entity is
entitled to a revenue credit equal to no more than thirty-nine
percent of the purchase price of the investor's investment in the
qualified investment community development entity: Provided, That
no investors shall receive the revenue credit without the approval
of the authority. The tax credit may be utilized as follows:
(1) The holder of the investment in the qualified community
development entity on a particular credit allowance date of such
investment, whether it be the original purchaser or subsequent
holder of the investment in the qualified community development
entity, may utilize a portion of the tax credit against its tax
liability for the taxable year that includes such credit allowance
date equal to the applicable percentage for such credit allowance
date multiplied by the purchase price paid for such investment; and
(2) Any tax credit that a taxpayer may not utilize during a
particular year may be carried forward for use in any subsequent
tax year.
(b) No tax credit claimed under this section may be sold or
transferred. Tax credits that a partnership, limited liability
company, S corporation, or other "pass-through" entity claim may be
allocated to the partners, members, or shareholders of such entity
for their direct use in accordance with the provisions of any
agreement among such partners members, or shareholders.
(c) The credits allowed under this section shall be taken
after all other credits allowed by chapter eleven of this code have
been taken. The credits must be taken against the same taxes and
in the same order as set forth in subsections (c) through (i),
inclusive, section five, article thirteen-c, chapter eleven of this
code.
(d) Credits allowed under this section may not be used against
any liability the taxpayer may have for interest, penalties or
additions to tax.
(e) The total amount of tax credits that may be awarded by the
authority pursuant to this section shall be limited to $2 million
in each fiscal year.
(f) Credits authorized by this section shall be allocated
pursuant to such rules as the authority may propose from time to
time pursuant to the provisions of section five of this article,
and pursuant to such policies and procedures as the authority may
adopt from time to time to effectuate the purposes of this article.§5E-3-9. Creation of revolving fund.
(a) The authority shall deposit all profits collected from
investors receiving recoverable revenue credits, pursuant to
section seven of this article, into a special State Treasury Fund
to be known as "The Innovation and Development Revolving Fund."
The revolving fund shall be a permanent and perpetual fund
administered by the economic development authority on behalf of the
development office. Expenditures from the fund shall be for the
purposes set forth in this section and made in accordance with
appropriations from the Legislature and pursuant to the provisions
of article three, chapter twelve of this code and after the
fulfillment of the provisions of article two, chapter eleven-b of
this code: Provided, That for the fiscal year ending June 30, 2011
expenditures are authorized from collections and not Legislative
appropriations.
(b) (1) The revolving fund shall be governed, administered and
accounted for by the directors, officers and managerial staff of
the Economic Development Authority as a special revenue account separate and distinct from any other moneys, funds or funds owned
and managed by the Economic Development Authority. The revolving
fund shall consist of sub-accounts, as deemed necessary by the
Economic Development Authority, for the deposit of:
(A) All profits collected from investors receiving recoverable
revenue credits, pursuant to section seven of this article; and
(B) All income earned on moneys held in the revolving fund.
(2) Revolving fund amounts not expended at the close of the
fiscal year shall not lapse or revert to the General Fund but shall
be carried forward to the next fiscal year. Any interest earnings
on the revolving fund shall become part of the revolving fund and
shall not lapse or revert to the General Fund.
(c) Revolving fund moneys shall be used by the Economic
Development Authority to award moneys for the purposes of section
six of this article in an amount not to exceed $2 million annually
and then to reimburse the state for any recoverable tax credits
awarded pursuant to section seven of this article.§5E-3-10. Conflict of interest.
No officer, member or employee of the authority may be
financially interested, directly or indirectly, in any company or
business receiving technical assistance, investments or recoverable
revenue credits pursuant to the provisions of this article.§5E-3-11. Confidentiality.
(a) The authority shall, by rule, determine which records,
reports, or information obtained from any person or entity under
this article are to be treated by the agency as confidential and not subject to disclosure, except as hereinafter provided in
subsection (c) of this section: Provided, That notwithstanding any
other provision of law to the contrary, the authority shall make
available to the public the identity of all qualified investment
companies receiving technical assistance or investments pursuant to
the provisions of this article.
(b) Any other records, reports, or information obtained from
any person or entity under this article shall be made available to
the public, except that upon a showing at the time of submission,
satisfactory to the authority, by any person or entity, that
records, reports or information, or a particular part thereof, to
which the authority or any officer, employee or representative
thereof has or will have access under this section, if made public,
would divulge information entitled to protection under 18 U.S.C.
§1905 as that section read on December 20, 1999, such information
or particular portion thereof is confidential in accordance with
the purposes of this section. In submitting data under this
article, a person required to provide such data may designate the
data which he or she believes is entitled to protection under this
subsection and submit such designated data separately from other
data submitted under this article. A designation under this
subsection shall be made in writing and in such manner as the
authority may prescribe.
(c) Notwithstanding the foregoing provisions of this section,
any record, report, document, or information may be disclosed to
other officers, employees, or authorized representatives of this state charged with administering the provisions of this article.
Notwithstanding the previous sentence, and notwithstanding any
provision of this article, the provisions of this code regarding
confidentiality and the disclosure of tax returns and tax
information, including specifically section five-d, article ten,
chapter eleven of this code, apply to the authority, its agents and
employees and to information submitted to the authority under this
article.

CHAPTER 31. CORPORATIONS.

ARTICLE 15. WEST VIRGINIA ECONOMIC DEVELOPMENT AUTHORITY.
§31-15-6. General powers of authority.
The authority, as a public corporation and governmental
instrumentality exercising public powers of the state, shall have
and may exercise all powers necessary or appropriate to carry out
the purposes of this article, including the power:
(a) To cooperate with industrial development agencies in
efforts to promote the expansion of industrial, commercial,
manufacturing and tourist activity in this state.
(b) To determine, upon the proper application of an industrial
development agency or an enterprise, whether the declared public
purposes of this article have been or will be accomplished by the
establishment by such agency or enterprise of a project in this
state.
(c) To conduct examinations and investigations and to hear
testimony and take proof, under oath or affirmation, at public or private hearings, on any matter relevant to this article and
necessary for information on the establishment of any project.
(d) To issue subpoenas requiring the attendance of witnesses
and the production of books and papers relevant to any hearing
before such authority or one or more members appointed by it to
conduct any hearing.
(e) To apply to the circuit court having venue of such offense
to have punished for contempt any witness who refuses to obey a
subpoena, to be sworn or affirmed or to testify or who commits any
contempt after being summoned to appear.
(f) To authorize any member of the authority to conduct
hearings, administer oaths, take affidavits and issue subpoenas.
(g) To financially assist projects by insuring obligations in
the manner provided in this article through the use of the
insurance fund.
(h) To finance any projects by making loans to industrial
development agencies or enterprises upon such terms as the
authority shall deem appropriate: Provided, That nothing contained
in this subsection (h) or under any other provision in this article
shall be construed as permitting the authority to make loans for
working capital: Provided, however, That nothing contained in this
article shall be construed as prohibiting the authority from
insuring loans for working capital made to industrial development
agencies or to enterprises by financial institutions: Provided
further, That nothing contained in this subsection or any other
provision of this article shall be construed as permitting the authority to refinance existing debt except when such refinancing
will result in the expansion of the enterprise whose debt is to be
refinanced or in the creation of new jobs.
(i) To issue revenue bonds or notes to fulfill the purposes of
this article, and to secure the payment of such bonds or notes, all
as hereinafter provided.
(j) To issue and deliver revenue bonds or notes in exchange
for a project.
(k) To borrow money for its purposes and issue bonds or notes
for the money and provide for the rights of the holders of the
bonds or notes or other negotiable instruments, to secure the bonds
or notes by a deed of trust on, or an assignment or pledge of, any
or all of its property and property of the project, including any
part of the security for loans, and the authority may issue and
sell its bonds and notes, by public or private sale, in such
principal amounts as it shall deem necessary to provide funds for
any purposes under this article, including the making of loans for
the purposes set forth in this article.
(l) To maintain such sinking funds and reserves as the board
shall determine appropriate for the purposes of meeting future
monetary obligations and needs of the authority.
(m) To sue and be sued, implead and be impleaded, and complain
and defend in any court.
(n) To adopt, use and alter at will a corporate seal.
(o) To make, amend, repeal and adopt both bylaws and rules and
regulations for the management and regulation of its affairs.
(p) To appoint officers, agents and employees and to contract
for and engage the services of consultants.
(q) To make contracts of every kind and nature to execute all
instruments necessary or convenient for carrying on its business.
(r) To accept grants and loans from and enter into contracts
and other transactions with any federal agency.
(s) To take title by conveyance or foreclosure to any project
where acquisition is necessary to protect any loan previously made
by the authority and to sell, by public or private sale, transfer,
lease or convey such project to any enterprise.
(t) To participate in any reorganization proceeding pending
pursuant to the United States Code (being the act of Congress
establishing a uniform system of bankruptcy throughout the United
States, as amended) or in any receivership proceeding in a state or
federal court for the reorganization or liquidation of an
enterprise. The authority may file its claim against any such
enterprise in any of the foregoing proceedings, vote upon any
questions pending therein which requires the approval of the
creditors participating in any reorganization proceeding or
receivership, exchange any evidence of such indebtedness for any
property, security or evidence of indebtedness offered as a part of
the reorganization of such enterprise or of any other entity formed
to acquire the assets thereof and may compromise or reduce the
amount of any indebtedness owing to it as a part of any such
reorganization.
(u) To acquire, construct, maintain, improve, repair, replace and operate projects within this state, as well as streets, roads,
alleys, sidewalks, crosswalks and other means of ingress and egress
to and from projects located within this state.
(v) To acquire, construct, maintain, improve, repair and
replace and operate pipelines, electric transmission lines,
waterlines, sewer lines, electric power substations, waterworks
systems, sewage treatment and disposal facilities and any
combinations thereof for the use and benefit of any enterprise
located within this state.
(w) To acquire watersheds, water and riparian rights, rights-
of-way, easements, licenses and any and all other property, property
rights and appurtenances for the use and benefit of any enterprise
located within this state.
(x) To acquire, by purchase, lease, donation or eminent domain,
any real or personal property, or any right or interest therein, as
may be necessary or convenient to carry out the purposes of the
authority. Title to all property, property rights and interests
acquired by the authority shall be taken in the name of the
authority.
(y) To issue renewal notes, or security interests, to issue
bonds to pay notes or security interests and, whenever it deems
refunding expedient, to refund any bonds or notes by the issuance
of new bonds or notes, whether the bonds or notes to be refunded
have or have not matured and whether or not the authority originally
issued the bonds or notes to be refunded.
(z) To apply the proceeds from the sale of renewal notes, security interests or refunding bonds or notes to the purchase,
redemption or payment of the notes, security interests or bonds or
notes to be refunded.
(aa) To accept gifts or grants of property, funds, security
interests, money, materials, labor, supplies or services from the
United States of America or from any governmental unit or any
person, firm or corporation, and to carry out the terms or
provisions of, or make agreements with respect to, or pledge, any
gifts or grants, and to do any and all things necessary, useful,
desirable or convenient in connection with the procuring, acceptance
or disposition of gifts or grants.
(bb) To the extent permitted under its contracts with the
holders of bonds, security interests or notes of the authority, to
consent to any modification of the rate of interest, time of payment
of any installment of principal or interest, security or any other
term of any bond, security interests, note or contract or agreement
of any kind to which the authority is a party.
(cc) To sell loans, security interests or other obligations in
the loan portfolio of the authority. Such security interests shall
be evidenced by instruments issued by the authority. Proceeds from
the sale of loans, security interests, or other obligations may be
used in the same manner and for the same purposes as bond and note
revenues.
(dd) To procure insurance against any losses in connection with
its property, operations or assets in such amounts and from such
insurers as the authority deems desirable.
(ee) To sell, license, lease, mortgage, assign, pledge or
donate its property, both real and personal, or any right or
interest therein to another or authorize the possession, occupancy
or use of such property or any right or interest therein by another,
in such manner and upon such terms as it deems appropriate.
(ff) To participate with the state and federal agencies in
efforts to promote the expansion of commercial and industrial
development in this state.
(gg) To finance, organize, conduct, sponsor, participate and
assist in the conduct of special institutes, conferences,
demonstrations and studies relating to the stimulation and formation
of business, industry and trade endeavors.
(hh) To conduct, finance and participate in technological,
business, financial and other studies related to business and
economic development.
(ii) To conduct, sponsor, finance, participate and assist in
the preparation of business plans, financing plans and other
proposals of new or established businesses suitable for support by
the authority.
(jj) To prepare, publish and distribute, with or without charge
as the authority may determine, such technical studies, reports,
bulletins and other materials as it deems appropriate, subject only
to the maintenance and respect for confidentiality of client
proprietary information.
(kk) To exercise such other and additional powers as may be
necessary or appropriate for the exercise of the powers herein conferred.
(ll) To exercise all of the powers which a corporation may
lawfully exercise under the laws of this state.
(mm) To contract for the provision of legal services by private
counsel, and notwithstanding the provisions of article three,
chapter five, such counsel may, but is not limited to, represent the
authority in court, negotiate contracts and other agreements on
behalf of the authority, render advice to the authority on any
matter relating thereto, prepare contracts and other agreements, and
provide such other legal services as may be requested by the
authority.
(nn) To develop, maintain, operate and apply for the
establishment of foreign trade zones pursuant to and in accordance
with all applicable provisions of federal law.(oo) To award funds, tax credits and recoverable revenue
credits and to collect profits on behalf of the state in accordance
with the recoverable revenue credits pursuant to article three,
chapter five-e of this code.

NOTE: The purpose of this bill is to establish a West Virginia
innovation and development program, to attract and support capital
investment in innovation-driven enterprises in West Virginia through
a combination of direct annual investment by the state in seed
capital, venture capital and other equity and debt investments in
West Virginia; technical support and assistance to entrepreneurs in
the state; and recoverable revenue credits to private investors to
encourage private investment in seed capital, venture capital and
other private equity funds, such program to be run and such funding
to be awarded through a competitive selection process to be managed
by the West Virginia Economic Development Authority.